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Mortgage lender fees questions

Can someone advise me as to whether paying "points" when getting a home loan is a good thing or not so good thing? I'm also curious to know about closing costs-- specifically, why some lenders charge certain fees and others don't. Should I shop around and if so, how? Advice is much appreciated!
  • August 02 2009 - Colorado Springs
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Answers (2)

Everybody always worries about interest, so you are allowed to pay points to honor a lower interest.  Based on a 30 year loan, buying the rate down will always rewards the borrower.  Interest adds up, if you're going to roll the closing cost in pay for the point to save you thousands in the long run.  I want to be clear, this is a buying point, 1% of the loan, lender charged.  Not a broker charged 1%.  Wells has two fee's, processing and underwriting totaling $950, everything else is 3rd party fee's.
  • August 02 2009
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Paying points generally depends on how long you plan to stay in the home.  Your mortgage lender can help you do a breakeven analysis.  This is done by comparing the monthly payment with no points to the payment with points.  Then divide the cost of the points by the difference in monthly payment.  This is how many months it will take you to break even.  If you're certain you'll be in the home for at least that many months, then paying points might be a good idea.  But make sure you have plenty of emergency savings in place.  I recommend a minimum of six months of liquid funds.

All lenders generally have the same costs.  The difference is typically how those costs are presented to the borrower when they're passed on.  For example, all lenders will pull a credit report, but not all will charge a credit report fee.  This fee is either rolled into another fee, or just considered by the lender as a cost of doing business.  I would recommend not getting hung up on individual fees, but rather take into consideration the total amount of fees charged.  The best place to look for these fees, and to comparison shop, is on what's called the good faith estimate.  Good luck!
  • August 02 2009
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